DIRECTOR ROLES
AND
RESPONSIBILITIES
Dr. Phil Kenkel
Bill Fitzwater Endowed Chair in
Cooperatives
Introduction
Cooperative directors have a unique
position in that they are both the
decision making body for the
association, as well as the protectors of
members’ investment. Directors must act
in good faith and for the interests of the
cooperative. This means keeping within
the authorized powers of the board and
obeying the laws of the land. Any
deviation from this may result in
company and personal liability. For this
reason, today’s boards of directors must
be competent and have a clear idea of
what their roles and responsibilities are.
This paper will discuss the major roles
and responsibilities of the director as
well as some areas of possible liability
that should be avoided.
Welfare Duties
The first priority of the director is the
welfare of the cooperative and its
members. The duties of loyalty,
obedience, due care and diligence help
insure this remains a top priority. In
recent years confidentiality in particular
has become a major concern of
businesses. Directors gain special access
to privileged information, not only of the
company, but of individual private
customers. This information should be
kept confidential for several reasons
including competitive reasons, insider
information, and individual privacy.
Sensitive information that is leaked
could cause any number of serious
repercussions ranging from losing a
customer to a major lawsuit. Members
must consider carefully a potential
director’s loyalty to the company as well
as their obedience to laws, their care in
decision-making, and their diligence in
making decisions that are best for the
association. These kinds of directors
hold the complete trust of the members
who have entrusted them with this
position.
Basic Duties
More basic and measurable
responsibilities of the board include:
hiring and evaluating the general
manager, setting long term goals and
objectives for the association,
determining the best allocation of the
companies resources, approving the hire
of key personnel, and overseeing the
financial performance of the association.
One should note that this list does not
include the daily operations of the
cooperative or the short-term goals that
will be used to implement the vision and
objectives of the cooperative. These
duties as well as employee relations fall
to the manager and should not be
encroached upon by the directors. A
strong manager will appreciate the trust
placed in him or her to do the job well.
For a more complete list on manager and
director duties see the section entitled
“Director Vs. Manager Duties.” Strong
managers like strong boards and visa
versa.
Hiring the General Manager
Hiring the general manager is a decision
that will change the face of the
cooperative and could be the most
important decision a board makes.
Today’s CEO is very different than
twenty years ago or even ten. In this
highly competitive business environment
managers must not only maintain their in
some cases very large business but also
analyze the cooperative’s participation in
joint ventures and LLCs in order to help
the board make a better informed
decision. This means that today’s CEO
will need different skills, like delegation,
project management, leadership,
communication, and conflict resolution
skills. Today’s Board cannot just be a
“watch dog” but must also be a part of a
planning team with the CEO. There a
many new challenges in understanding
facility needs and market issues and
competent management is a must. There
is an increased need to encourage and
invest in management development as
well as a need to actively plan for
management succession.
Other Duties of the Board
There are also some duties of the board
that may not be as obvious, but can have
just as great of an impact. All of the
duties we have discussed so far (e.g.
decision making, resource allocation,
and member confidence) have fallen
under the broad category of stewardship.
Other categories include active
participation, informed participation, and
compliance. Active participation and
informed participation are primarily the
directors responsibility of diligence and
due care discussed earlier. The best
decisions that are made for an
association are developed out of careful
consideration and complete information.
Compliance involves maintaining moral
standards and abiding by the by-laws
and articles of incorporation of the
cooperative, as well as the laws of the
land.
Director Vs. Manager Duties
There are some duties that the manager
and directors share; however, there are
many that fall exclusively in the realm of
responsibility for one or the other. The
following table compares some of the
exclusive duties of the manager with the
duties of the board.
Manager’s Duties
Purchase of small assets (e.g. pickup)
Hiring employees
Training employees
Negotiating market contracts
Purchase of office supplies
Adjust employee wages
Terminating employees
Setting employee policy
Directors’ Duties
Establish Credit Policy
Determine Director Compensation
Establish Pricing Policy
Plan annual meeting
Set manager’s salary
Engage and auditing firm
Establish per-unit retain
Conclusion
The roles and responsibilities of the
board are there to protect the members
and the cooperative as well as to grow
the business. Good boards of directors
provide dynamic leadership by being
honest, aggressive, and continually
looking for opportunities to grow the
business. A strong board of directors is
an essential part of a growing and
successful cooperative.